Crypto exchanges are racing to calm the nerves of customers after the FTX collapse

Digital asset exchanges are scrambling to reassure customers that their funds are safe as Sam Bankman-Fried’s FTX crypto exchange collapses in the industry.

The world’s largest crypto exchange, Binance, as well as smaller rivals including, OKX and Derbit, have pledged to publish proof that they hold enough reserves to match their debts to their customers. Coinbase, the US-listed exchange, the digital asset space founded by Sam Bankman-Fried, has tried to distance itself from the crisis facing FTX.

The sudden collapse last week of FTX and Bankman-Fried trading shop Alameda Research, once seen as a pillar of the industry, has severely damaged confidence in the digital asset market. Before Friday’s bankruptcy, FTX had less than $1 billion in marketable assets and $9 billion in debt, the Financial Times reported Saturday.

Tether’s eponymous US dollar stablecoin – the largest in the industry – has faced roughly $3bn in redemptions in the past four days, according to data provider CoinMarketCap, highlighting how traders are withdrawing funds from the digital asset market.

Meanwhile, Ether balances, the second-largest cryptocurrency, fell 7 percent in the last two weeks to 22.9mn major crypto exchanges, including FTX, according to data from the blockchain analysis platform Nansen. At current exchange rates, this represents a fall of nearly $2 billion, suggesting that some investors are pulling their coins from central locations to store them using their own systems.

The CEO of Binance warned last week that the collapse of FTX could lead to an “exciting” crisis in the crypto sector, which could be compared to the 2008 global financial crisis. FTX had a $32 billion valuation after striking deals with major investors and was building its public profile through sports sponsorships such as the naming rights to the Miami Heat arena.

Coinbase sent an email to customers on Friday, seen by the FT, outlining “how Coinbase’s business is different and ultimately better protecting” customer accounts and assets. The email, citing the company’s financial position, said the exchange, which is led by CEO Brian Armstrong, holds the assets of clients on a one-to-one basis. Coinbase declined to comment beyond a blog post last week.

Trading venues tried to distance themselves from FTX residuals after the group said it was investigating unusual transactions. Elliptic, a blockchain forensics firm, said on Saturday that there are indications that $477mn in cryptoassets were taken from FTX on Friday night.

Crypto trading platform Kraken has suspended a handful of accounts at FTX Group, its sister firm Alameda Research, and their executives after speaking with law enforcement. “These accounts have been frozen to protect their creditors,” the company tweeted, adding that other Kraken customers were not affected.

The Bahamas market regulator also said it “did not direct, authorize or propose to FTX Digital Markets Ltd any priority funds for Bahamian clients”. FTX, which is based in the island nation, said last week it would allow redemptions of Bahamian currency “under the control and regulators of Bahamian headquarters” after it suspended customer withdrawals.

Binance, on the other hand, has temporarily suspended FTT deposits of the FTX-issued token to protect users. “We have noticed a large amount of suspicious activity of $FTT by token contract deployers,” the exchange said on Sunday, and suggested how to keep their digital assets safe.

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